Mid-life crisis financial advice needed please
Discussion
I would appreciate some advice please, or some suggestions, as I'm getting to the stage in life where you suddenly realise that you only have 20-25 years left to make enough money to retire. Life goes past quickly and it creeps up on you apparently.
I will lay out my situation as simply, and as honestly as I can:
I'm 42 and my wife is 41. We have one child nearing the end of primary school.
Our house is worth approx £1m or a touch more, and is paid for, no mortgage.
We have around £150k in higher-interest savings accounts and in ISA's (although none of them seems to be particularly high interest)
No loans, car payments, items on finance, or anything like that. Outgoings are stuff like council tax, bills, groceries, fuel, dining out, holidays, etc.
I earn £80k and my wife earns £40k. After tax (and some pension contributions) we have around £6800 a month coming in.
We save £3000ish a month. Sometimes more.
I am painfully aware that it is a nonsense to have £150k in the bank and wasting the value that is sat in our home, and should be making both of those things work for us, to make us more money, or invest for retirement, but I honestly don't know where to start. I'm not a finance person or a money person. I just work hard and earn it, and so does my wife.
My wife will likely walk away with a decent pension as she's been with the same company for 20 years and they have a good pension scheme.
I on the other hand, have only contributed the bare minimum to my pension schemes, as I always felt is was best to use the money then and there for things like paying off the house years ago, and ending the purgatory of paying the thieving bar-stewards at the banks their interest, as fast as possible.
We are fairly risk averse, but at the same time we need to get off our backsides and risk some cash to earn some kind of return.
I would really appreciate suggestions on what do to, and what to buy, or invest in, to create some kind of long term return or something to use to provide an income during my retirement years.
I did the sums on a using the £150k cash + £150k 20 year mortgage, to buy a £300k holiday cottage local to us, which currently generates £24k a year after paying the cleaning and management fees, but then £11k a year would be taken off for the mortgage payments, leaving £13,000 a year income for us, until the mortgage is paid off, when it will (in theory) jump back up to £24k a year (or the equivalent of in 20 years).
That was the best I could come up with really, and now I'm all out of ideas, so any guidance on what to do would be welcome.
Thanks in advance.
I will lay out my situation as simply, and as honestly as I can:
I'm 42 and my wife is 41. We have one child nearing the end of primary school.
Our house is worth approx £1m or a touch more, and is paid for, no mortgage.
We have around £150k in higher-interest savings accounts and in ISA's (although none of them seems to be particularly high interest)
No loans, car payments, items on finance, or anything like that. Outgoings are stuff like council tax, bills, groceries, fuel, dining out, holidays, etc.
I earn £80k and my wife earns £40k. After tax (and some pension contributions) we have around £6800 a month coming in.
We save £3000ish a month. Sometimes more.
I am painfully aware that it is a nonsense to have £150k in the bank and wasting the value that is sat in our home, and should be making both of those things work for us, to make us more money, or invest for retirement, but I honestly don't know where to start. I'm not a finance person or a money person. I just work hard and earn it, and so does my wife.
My wife will likely walk away with a decent pension as she's been with the same company for 20 years and they have a good pension scheme.
I on the other hand, have only contributed the bare minimum to my pension schemes, as I always felt is was best to use the money then and there for things like paying off the house years ago, and ending the purgatory of paying the thieving bar-stewards at the banks their interest, as fast as possible.
We are fairly risk averse, but at the same time we need to get off our backsides and risk some cash to earn some kind of return.
I would really appreciate suggestions on what do to, and what to buy, or invest in, to create some kind of long term return or something to use to provide an income during my retirement years.
I did the sums on a using the £150k cash + £150k 20 year mortgage, to buy a £300k holiday cottage local to us, which currently generates £24k a year after paying the cleaning and management fees, but then £11k a year would be taken off for the mortgage payments, leaving £13,000 a year income for us, until the mortgage is paid off, when it will (in theory) jump back up to £24k a year (or the equivalent of in 20 years).
That was the best I could come up with really, and now I'm all out of ideas, so any guidance on what to do would be welcome.
Thanks in advance.
Goldman Sachs said:
I would appreciate some advice please, or some suggestions, as I'm getting to the stage in life where you suddenly realise that you only have 20-25 years left to make enough money to retire. Life goes past quickly and it creeps up on you apparently.
I will lay out my situation as simply, and as honestly as I can:
I'm 42 and my wife is 41. We have one child nearing the end of primary school.
Our house is worth approx £1m or a touch more, and is paid for, no mortgage.
We have around £150k in higher-interest savings accounts and in ISA's (although none of them seems to be particularly high interest)
No loans, car payments, items on finance, or anything like that. Outgoings are stuff like council tax, bills, groceries, fuel, dining out, holidays, etc.
I earn £80k and my wife earns £40k. After tax (and some pension contributions) we have around £6800 a month coming in.
We save £3000ish a month. Sometimes more.
I am painfully aware that it is a nonsense to have £150k in the bank and wasting the value that is sat in our home, and should be making both of those things work for us, to make us more money, or invest for retirement, but I honestly don't know where to start. I'm not a finance person or a money person. I just work hard and earn it, and so does my wife.
My wife will likely walk away with a decent pension as she's been with the same company for 20 years and they have a good pension scheme.
I on the other hand, have only contributed the bare minimum to my pension schemes, as I always felt is was best to use the money then and there for things like paying off the house years ago, and ending the purgatory of paying the thieving bar-stewards at the banks their interest, as fast as possible.
We are fairly risk averse, but at the same time we need to get off our backsides and risk some cash to earn some kind of return.
I would really appreciate suggestions on what do to, and what to buy, or invest in, to create some kind of long term return or something to use to provide an income during my retirement years.
I did the sums on a using the £150k cash + £150k 20 year mortgage, to buy a £300k holiday cottage local to us, which currently generates £24k a year after paying the cleaning and management fees, but then £11k a year would be taken off for the mortgage payments, leaving £13,000 a year income for us, until the mortgage is paid off, when it will (in theory) jump back up to £24k a year (or the equivalent of in 20 years).
That was the best I could come up with really, and now I'm all out of ideas, so any guidance on what to do would be welcome.
Thanks in advance.
pensions, pensions, pensions. I will lay out my situation as simply, and as honestly as I can:
I'm 42 and my wife is 41. We have one child nearing the end of primary school.
Our house is worth approx £1m or a touch more, and is paid for, no mortgage.
We have around £150k in higher-interest savings accounts and in ISA's (although none of them seems to be particularly high interest)
No loans, car payments, items on finance, or anything like that. Outgoings are stuff like council tax, bills, groceries, fuel, dining out, holidays, etc.
I earn £80k and my wife earns £40k. After tax (and some pension contributions) we have around £6800 a month coming in.
We save £3000ish a month. Sometimes more.
I am painfully aware that it is a nonsense to have £150k in the bank and wasting the value that is sat in our home, and should be making both of those things work for us, to make us more money, or invest for retirement, but I honestly don't know where to start. I'm not a finance person or a money person. I just work hard and earn it, and so does my wife.
My wife will likely walk away with a decent pension as she's been with the same company for 20 years and they have a good pension scheme.
I on the other hand, have only contributed the bare minimum to my pension schemes, as I always felt is was best to use the money then and there for things like paying off the house years ago, and ending the purgatory of paying the thieving bar-stewards at the banks their interest, as fast as possible.
We are fairly risk averse, but at the same time we need to get off our backsides and risk some cash to earn some kind of return.
I would really appreciate suggestions on what do to, and what to buy, or invest in, to create some kind of long term return or something to use to provide an income during my retirement years.
I did the sums on a using the £150k cash + £150k 20 year mortgage, to buy a £300k holiday cottage local to us, which currently generates £24k a year after paying the cleaning and management fees, but then £11k a year would be taken off for the mortgage payments, leaving £13,000 a year income for us, until the mortgage is paid off, when it will (in theory) jump back up to £24k a year (or the equivalent of in 20 years).
That was the best I could come up with really, and now I'm all out of ideas, so any guidance on what to do would be welcome.
Thanks in advance.
You need to understand the exact value of the pensions that you have, and then work out how best to build them up in the time that you have remaining.
i.e. you may have been paying in the "minimum" since you started, but compound interest in the right funds might have done quite well over time. It is entirely possible that they are already worth more than your "savings" today.
Make sure you can login to them, see the fees and funds, and start caring about them more than you care about the 150K in ISAs.
(Oh and you might want to consider S&S ISAs instead of cash ISAs given a 20 year timescale)
fat80b said:
pensions, pensions, pensions.
You need to understand the exact value of the pensions that you have, and then work out how best to build them up in the time that you have remaining.
i.e. you may have been paying in the "minimum" since you started, but compound interest in the right funds might have done quite well over time. It is entirely possible that they are already worth more than your "savings" today.
Make sure you can login to them, see the fees and funds, and start caring about them more than you care about the 150K in ISAs.
(Oh and you might want to consider S&S ISAs instead of cash ISAs given a 20 year timescale)
Thanks for the reply. You need to understand the exact value of the pensions that you have, and then work out how best to build them up in the time that you have remaining.
i.e. you may have been paying in the "minimum" since you started, but compound interest in the right funds might have done quite well over time. It is entirely possible that they are already worth more than your "savings" today.
Make sure you can login to them, see the fees and funds, and start caring about them more than you care about the 150K in ISAs.
(Oh and you might want to consider S&S ISAs instead of cash ISAs given a 20 year timescale)
I presume you are suggesting that ploughing money onto pensions over the next 20 years is likely to be a better bet than buying into property or other physical assets? (I appreciate no one has a crystal ball and I'm not going to quote you on this).
Goldman Sachs said:
Thanks for the reply.
I presume you are suggesting that ploughing money onto pensions over the next 20 years is likely to be a better bet than buying into property or other physical assets? (I appreciate no one has a crystal ball and I'm not going to quote you on this).
Ironic user name.I presume you are suggesting that ploughing money onto pensions over the next 20 years is likely to be a better bet than buying into property or other physical assets? (I appreciate no one has a crystal ball and I'm not going to quote you on this).
In my opinion you need financial advice.
Goldman Sachs said:
Thanks for the reply.
I presume you are suggesting that ploughing money onto pensions over the next 20 years is likely to be a better bet than buying into property or other physical assets? (I appreciate no one has a crystal ball and I'm not going to quote you on this).
100% - IMHO, property is hard, and returns are not that great or guaranteed. Just plot property prices adjusted for inflation in the lat 20 years and you'll see it's not all its cracked up to be - We have a strange view in this country in thinking that property ownership is a "great investment" when the numbers don't really support that statement.... I presume you are suggesting that ploughing money onto pensions over the next 20 years is likely to be a better bet than buying into property or other physical assets? (I appreciate no one has a crystal ball and I'm not going to quote you on this).
Whereas, you immediately gain on the way into a pension (by saving the tax) and you never have to pay CGT to get your money out. A reasonable expectation is that you should be 1 tax band lower when you withdraw the increased amounts from your pension at retirement age (currently 57) and thats a win-win even before the stock market growth (which historically beats property growth).
Goldman Sachs said:
I presume you are suggesting that ploughing money onto pensions over the next 20 years is likely to be a better bet than buying into property or other physical assets? (I appreciate no one has a crystal ball and I'm not going to quote you on this).
For context, your £150k + £3k a month spare at historical average stock market returns would result in a pot of £2.1mn in 20 years, or £3.25mn in 25 years.
Obviously no guarantee investing, but 20 years is long enough to have the odds stacked in your favour. You are still very well positioned to grow a significant pot.
simon800 said:
Goldman Sachs said:
I presume you are suggesting that ploughing money onto pensions over the next 20 years is likely to be a better bet than buying into property or other physical assets? (I appreciate no one has a crystal ball and I'm not going to quote you on this).
For context, your £150k + £3k a month spare at historical average stock market returns would result in a pot of £2.1mn in 20 years, or £3.25mn in 25 years.
Obviously no guarantee investing, but 20 years is long enough to have the odds stacked in your favour. You are still very well positioned to grow a significant pot.
But since you ask about a mid life crisis, then maybe you should do mid life crisis properly and get a car, assuming you haven't already of course
Not financial advice from me(nobody needs that) but your post has led me to these questions:
What cars do you own? (Can’t be anything too exciting if you manage to save £3k a month!)
What cars would you like to own?
Have you enjoyed your 24ish years as an adult, or has it all been spent with one eye on the spreadsheet?
What cars do you own? (Can’t be anything too exciting if you manage to save £3k a month!)
What cars would you like to own?
Have you enjoyed your 24ish years as an adult, or has it all been spent with one eye on the spreadsheet?
hotchy said:
You've got a £1m home and £150k cash and your 40. I wouldnt worry, you've made it.
To be fair he couldn't have got there in 20 working years on his/Mrs salaries so there must have been an inheritance or similar somewhere along the line. Presumably that's not a repeatable trick so he's thinking about the next 20 years not the last.Well done on achieving your current financial status. You have a bright financial future ahead.
Agree professional financial advice is required.
The first thing I would do (and have done to retire early at 55) is salary sacrifice just under £30k of your annual salary into your pension but retain 40% tax status so you get the maximum tax back on your sacrifice.
Put the remainder of your savings in ISA’s.
Then you need an investment strategy for your £150k ISA and your new enlarged pension. Most of ISA needs to be in stocks and shares.
Take advice but avoid IFA annual fees as a percentage of your investment pot because they eat into your capital massively over time. Check out several IFA’s before proceeding with any. Be cautious in your decision and be prepared to walk away at any point (I sacked my IFA last year).
Look up compound interest and calculate what £30k pa will look like in 20 years. Do the same for the £150k ISA monies.
Balance save/spend for the next 20 years and do things you want to now. Life doesn’t begin when you retire. If you make it that far.
What cars do you want to own
Oh, and avoid getting divorced over the next 20+ years as it tends to mess up financial planning.
Agree professional financial advice is required.
The first thing I would do (and have done to retire early at 55) is salary sacrifice just under £30k of your annual salary into your pension but retain 40% tax status so you get the maximum tax back on your sacrifice.
Put the remainder of your savings in ISA’s.
Then you need an investment strategy for your £150k ISA and your new enlarged pension. Most of ISA needs to be in stocks and shares.
Take advice but avoid IFA annual fees as a percentage of your investment pot because they eat into your capital massively over time. Check out several IFA’s before proceeding with any. Be cautious in your decision and be prepared to walk away at any point (I sacked my IFA last year).
Look up compound interest and calculate what £30k pa will look like in 20 years. Do the same for the £150k ISA monies.
Balance save/spend for the next 20 years and do things you want to now. Life doesn’t begin when you retire. If you make it that far.
What cars do you want to own
Oh, and avoid getting divorced over the next 20+ years as it tends to mess up financial planning.
jonsp said:
o be fair he couldn't have got there in 20 working years on his/Mrs salaries so there must have been an inheritance or similar somewhere along the line. Presumably that's not a repeatable trick so he's thinking about the next 20 years not the last.
Exactly this, as soon as I read someone is in their early 40s and has a million pound home with zero mortgage I wonder how they do it. Put it this way, I am older than you and both myself and my partner earn more than you and this would be a pipe dream.TownIdiot said:
To help him agree a strategy.
A full review of the options would be money well spent here. He then doesn't need to use an advisor to manage the investments unless he wants to.
Most IFA's want to manage investments, good luck finding one for one off advice!A full review of the options would be money well spent here. He then doesn't need to use an advisor to manage the investments unless he wants to.
OP's circumstances aren't particularly complex, advice would be warranted around tax planning, IHT, trusts etc but unless OP is really adverse to investing a small amount of time into learning then I can't see why advice is needed.
If OP is completely against any hands on involvement and is happier to pay someone else to do it then fair enough. But it's really not as complex as some people are led to believe.
simon800 said:
Most IFA's want to manage investments, good luck finding one for one off advice!
OP's circumstances aren't particularly complex, advice would be warranted around tax planning, IHT, trusts etc but unless OP is really adverse to investing a small amount of time into learning then I can't see why advice is needed.
If OP is completely against any hands on involvement and is happier to pay someone else to do it then fair enough. But it's really not as complex as some people are led to believe.
Any good ifa will produce a report with recommendations for a fee.OP's circumstances aren't particularly complex, advice would be warranted around tax planning, IHT, trusts etc but unless OP is really adverse to investing a small amount of time into learning then I can't see why advice is needed.
If OP is completely against any hands on involvement and is happier to pay someone else to do it then fair enough. But it's really not as complex as some people are led to believe.
If they won't do that then they are neither independent, nor good.
The advice is needed to explain the basics in detail, with the benefit of insight into the OPs goals.
It would be a few grand very well spent, as the OP obviously already knows how to save
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